If you have been waiting to start investing in gold, you can slowly start now. Gold prices, which had crossed the Rs 29,000 per 10g mark, are now down by seven per cent or below Rs 28,000. Analysts feel this asset class has a lot to promise in the next couple of years.
In the beginning of November, gold stood at a little above Rs 27,000. It went up steadily to Rs 29,000 and then corrected by over Rs 1,000, in early December. "It can be a good way for new investors to start accumulating gold in small portions," says Naveen Mathur, associate director, commodities & currencies, at Angel Broking.
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Analysts believe gold is likely to correct further next year and will find strong resistance at the Rs 26,000-25,000 level. This is when investors will flock back to the metal, though they have a cautious approach towards it now.
|INVESTMENT EXPENSE SHEET |
| ||Gold ETFs ||E-gold ||Gold Feeder |
|Brokerage (%) ||0.5 || |
|Expense ratio (%) ||1 || |
|Demat maintenance |
|400-500 ||400-500 || |
|Transaction cost (Rs) || |
Pranav Mer, senior analyst, commodities, at Mangal Keshav Securities, suggests investors start accumulating gold in small portions from the Rs 27,000 levels till it touches Rs 25,500. Say, you want to hold 10 per cent of your portfolio in gold, you can start buying two to three per cent at every dip.
International markets have currently gone for the Christmas break and will return in the new year. Gold prices will depend on how the euro crisis shapes up after the holidays. This is so because till now the euro crisis has led to rupee depreciation and dollar appreciation against it. A strong rupee, in turn, has kept the domestic gold price high, though international prices have corrected more than domestic ones. International prices have slid from $2,000 an ounce to $1,600 since September first week. At that time, domestic prices stood at Rs 28,160 and today, they are at Rs 27,700.
"Here, we also need to see which way the equity markets will move because internationally, gold has fallen due to the weakness in equities. As a result, the yellow metal has lost the safe haven tag for now and investors are hesitating from buying it," adds Mathur.
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You are advised against investing in physical gold. Instead take the exchange-traded fund (ETF) route or opt for the National Spot Exchange's e-gold series. Gold ETF is the oldest form of paper gold but requires a demat account to invest and allows systematic investments. The e-gold option requires opening a demat account with the National Spot Exchange but allows systematic investment. In the present scenario, it would make sense to keep track of gold prices and buy on dips, rather than going the systematic way. There is another cost-effective investment option of gold feeder funds or gold saving funds (see table).
Mer believes the rupee will not breach the 50 per dollar mark anytime soon. This will keep gold strong. However, one should invest with a one- to two-year horizon, not more, as the market condition two-three years later cannot be predicted.
Certified financial planner Arnav Pandya is not excited about the prospects of gold, as any sharp correction in the rupee will impact these prices. Also, the domestic market is bound to be impacted if global prices, which are easing, collapse. "Therefore, investors should base their decision on the outlook for gold, instead of taking a cue from minor corrections. Do not buy gold unless for urgent consumption," he says.